The United States Patent and Trademark Office cannot recover salaries of its lawyers and paralegals in civil actions brought under 35 U.S.C. §145
| December 26, 2019
Peter v. Nantkwest, Inc.
December 11, 2019
Opinion by Justice Sotomayor (unanimous decision)
Summary
The “American Rule” is the principle that parties are responsible for their own attorney’s fees. While the Patent Act requires applicants who choose to pursue civil action under 35 U.S.C. §145 to pay the expenses of the proceedings, the Supreme Court found that the American Rule’s presumption applies to §145, and the “expenses” does not include salaries of its lawyers and paralegals.
Details
There are two possible ways in which a dissatisfied applicant may appeal the final decision of the Patent Trial and Appeal Board. One option is to appeal to the United States Court of Appeals for the Federal Circuit under 35 U.S.C. §141. In choosing this avenue, the applicant will not be able to offer new evidence that was not presented before the USPTO. The other option is to seek remedy in filing a civil action against the Director of the USPTO in federal district court under 35 U.S.C. §145. Unlike under 35 U.S.C. §141, the applicant may introduce new evidence, and the district court would make de novo determinations based on the new evidence and the administrative record before the USPTO. Because 35 U.S.C. §145 allows for an applicant to introduce new evidence, the litigation can be lengthy and expensive. For this reason, the Patent Act requires applicants who choose to file a civil action under 35 U.S.C. §145 to pay “[a]l the expenses of the proceedings.” 35 U.S.C. §145.
In this case, the USPTO denied NantKwest, Inc’s patent application, which was directed to a method for treating cancer. NantKwest Inc. then filed a complaint against the Director of the USPTO in the Eastern District of Virginia under 35 U.S.C. §145. The District Court granted summary judgment to the USPTO, which the Federal Circuit affirmed. The USPTO moved for reimbursement of expenses, including the pro rata salaries of the USPTO attorneys and paralegals who worked on the case. The Supreme Court noted in its opinion that this was “the first time in the 170-year history of §145” that the reimbursement of such salaries were requested as a part of expenses. The District Court denied the USPTO’s motion. NantKwest, Inc. v. Lee, 162 F. Supp. 3d 540 (E.D. Va. 2016). Then a divided Federal Circuit panel reversed. NantKwest, Inc. v. Matal, 860 F. 3d 1352 (2017). The en banc Federal Circuit voted sua sponte to rehear the case, and reversed the panel over a dissent, holding that the “American Rule” (the principle that parties are responsible for their own attorney’s fees) applied to §145, after examining the plain text, statutory history, the judicial and congressional understanding of similar language, and policy considerations. NantKwest, Inc. v. Iancu, 898 F. 3d 1177 (2018). The Supreme Court granted certiorari.
The Supreme Court first notes as the “basic point of reference” the principle of the “American Rule” which is that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” While the USPTO did not dispute this principle, it argued that the presumption applies only to prevailing-party statutes, and as §145 requires one party to pay all expenses, regardless of outcome, it is therefore not subject to the presumption. However, the Supreme Court stated that Sebelius v. Cloer, 569 U.S. 369 (2013) confirm that the presumption against fee shifting applies to all statutes, including statute like §145 that do not explicitly award attorney’s fees to “prevailing parties.”
The Supreme Court then analyzed whether Congress intended to depart from the American Rule presumption. The Supreme Court first looked at the plain text, reading the term alongside neighboring words in the statute, and concluded that the plain text does not overcome the American Rule’s presumption against fee shifting. The Supreme Court also looked at statutory usage, and found that “expenses” and “attorney’s fees” appear in tandem across various statutes shifting litigation costs, indicating “that Congress understands the two terms to be distinct and not inclusive of each other.” While some other statutes refer to attorney’s fees as a subset of expenses, the Supreme Court stated that they show only that attorney’s fees can be included in “expenses” when defined as such.
Based on the foregoing, the Supreme Court concluded that the USPTO cannot recover salaries of its lawyers and paralegals in civil actions brought under 35 U.S.C. §145.
Takeaway
The USPTO has recovered attorney costs under a similar trademark law, 15 U.S.C. 1071, in the 2015 Fourth Circuit decision of Shammas v. Focarino, 114 USPQ2d 1489 (4th Cir. 2015). While the Supreme Court does not mention the applicability of the interpretation of “expenses” under 35 U.S.C. §145 to the interpretation of “expenses” in 15 U.S.C. 1071(b)(3), we would expect the Supreme Court to interpret “expenses” the same way in both of these statutes.
Heightened “original patent” written description standard applies for reissue patents
| December 20, 2019
Forum US Inc., v. Flow Valve, LLC.
June 17, 2019
Before Reyna, Schall, and Hughes. Opinion by Reyna.
Summary
The CAFC affirmed a district court decision holding that Flow Valve’s Reissue Patent No. RE 45,878 (“the Reissue patent”) is invalid because of insufficiently supported broadening claims. The original patent “must clearly and unequivocally disclose the newly claimed invention as a separate invention,” otherwise the claims in the reissue patent do not comply with the original patent requirement of 35 USC 251.
Details
Flow Valve’s original Patent No. 8,215,213 (“the original patent), entitled “Workpiece Supporting Assembly” relates to machined pipe fittings typically used in the oil and gas industry. The written description and drawings disclose only embodiments with arbors.
Figs. 4 and 5 from the original patent with arbors circled in red:
Claim 1 of the original patent also expressly claimed the arbors (emphasis added):
A workpiece machining implement comprising:
a body member having an internal workpiece channel, the body member having a plurality of body openings communicating with the internal workpiece channel;
means supported by the body member for positioning a workpiece in the internal work piece in the internal workpiece channel so that extending workpiece portions of the workpiece extend from selected ones of the body openings;
a plurality of arbors supported by the body member, each arbor having an axis coincident with a datum axis of one of the extending workpiece portions; and
means for rotating the workpiece supporting assembly about the axis of a selected one of the arbors.
When Flow Valve filed the reissue patent application, the patentees broadened the claims by adding seven new claims, where the arbor limitations were replaced by a “pivotable” limitation. Claim 14 is representative of the reissue patent:
Claim 14 of the reissue patent:
A workpiece supporting assembly for securing an elbow during a machining process that is performed on the elbow by operation of a workpiece machining implement, the workpiece supporting assembly comprising:
a body having an internal surface defining a channel, the internal surface sized to receive a medial portion of the elbow when the elbow is operably disposed in the channel; and
a support that is selectively positionable to secure the elbow in the workpiece supporting assembly, the body pivotable to a first pivoted position, the body sized so that a first end of the elbow extends from the channel and beyond the body so the first end of the elbow is presentable to the workpiece machining implement for performing the machining process, the body pivotable to a second position and sized so that a second end of the elbow extends from the channel beyond the body so the second end of the elbow is presentable to the workpiece machining implement for performing the machining process.
Forum US, Inc. sued Flow Valve for a declaratory judgment of invalidity of the reissue patent, arguing that the added reissue claims were invalid because they did not comply with the original patent requirement under 35 USC 251.
In particular, Forum argued that the claims broadened the original patent claims by omitting the arbor limitations, which is a violation of the original patent requirement of Reissue patent because the original patent did not disclose an invention without arbors.
In response, Flows Valve supplied an expert declaration asserting that a person of ordinary skill in the art would have understood from the specification that not every embodiment requires “a plurality of arbors” and that the arbors are an optional feature.
The district court granted Forum’s summary judgement, holding that “no matter what a person of ordinary skill would recognize, the specification of the original patent must clearly and unequivocally disclose the newly claimed invention in order to satisfy the original patent rule.”
Flows Valve appealed but the CAFC affirmed the district court’s decision.
In affirming the district court’s decision, the CAFC relied on two cases U.S. Indus. Chems., Inc. v. Carbide & Carbon Chems. Corp., 315 U.S. 668 (1942), and Antares Pharma, Inc. v. Medac Pharma Inc., 771 F.3d 1354 (Fed. Cir 2014), to the effect that, for broadening reissue claims, “it is not enough that an invention might have been claimed in the original patent because it was suggested or indicated in the specification”, instead, the original patent “must clearly and unequivocally disclose the newly claimed invention as a separate invention.”
Like the District Court, the Appeals Court discounted the expert declaration, commenting that “when a person of ordinary skill in the art would understand ‘does not aid the court in understanding what the’ patent actually say.”
Take away
- Heightened “original patent” written description standard applies for reissue patents.
- Expert testimony on the understanding of a person of skill in the art as evidence is insufficient.
- If it is likely in the foreseeable future to have the needs to broaden the claims, use a continuation application so that applicant does not have to meet the additional “clear and unequivocal disclosure as separate invention” requirement of a broadening reissue.
